Oswald Gruebel's tough turnaround medicine may already have eased the pain at UBS in the last part of 2009, when analysts expect the Swiss bank to post its first quarterly profit in more than a year.
Traders said a report in Swiss paper NZZ am Sonntag saying UBS would be profitable in the fourth quarter confirmed hopes CEO Gruebel, previously successful at Credit Suisse, would end a string of losses spurred by writedowns and a U.S. tax row.
A consensus of 22 brokers' estimates circulated by UBS early in December showed that analysts expected on average the Swiss bank to turn in a net profit of 376 million Swiss francs ($364 million) in the fourth quarter, three analysts told Reuters.
Estimates varied between a loss of 669 million francs and profit of 1.459 billion.
"It's good news and confirming our expectations that the turnaround under the new management takes place slowly but surely," said Rainer Skierka, an analyst with Bank Sarasin.
Swiss television quoted Swiss National Bank chief Philipp Hildebrand on Monday as saying UBS stood on "solid ground."
UBS shares have rallied nearly 20 percent since hitting a four-month low of 14.76 francs at the end of November.
The shares climbed to a two-month peak of 17.5 francs on Monday but were down 0.7 percent at 17.1 francs by 1438 GMT (9:38 a.m. EST), underperforming a flat DJ Stoxx European Banking index.
Shares were hit by profit-taking after a 3.8 percent rally on Friday, traders say, and fell to a day's low below 17 francs after some cautious comments Gruebel sent to its staff.
In a memo seen by Reuters, the CEO said that UBS needed to raise its investment banking profitability "considerably" and that restructuring the fixed-income business that caused many of the writedowns in the last two years was "an urgent priority."
But Gruebel also said the bank was being sought out "for many large, global transactions."
UBS, which will publish its fourth-quarter results on Feb. 9, declined to comment on Monday.
Skierka said analysts on average expected UBS to lose 9.4 billion francs of net new client money at its flagship Wealth Management and Swiss Bank division, well below the 16.7 billion it suffered in the third quarter.
Clients fled UBS throughout 2009 after the bank was forced to hand over some confidential client data to U.S. tax authorities that accused it of helping rich Americans hide money in secret Swiss accounts.
The U.S. tax fraud investigation has pierced Switzerland's treasured bank secrecy and hit UBS's reputation and the bank is struggling to turn the corner.
"The picture in the fourth quarter is one of continued weakness in wealth management and more stability in investment banking," said Mathias Bueeler, an analyst with Kepler CM, who expects UBS to show break even to positive net profit in the final quarter of 2009.
Analysts also said they expected UBS to have attracted new client money in the high-growth Asian division in the fourth quarter, which had surprised on the downside in the previous quarter despite UBS's regional leadership.
"In wealth management, it is imperative that we stop the outflows of assets and increase the inflow," Gruebel told staff in his internal memo.
In November, Gruebel set a three- to five-year target of $15 billion annual pretax profit and said it would take about two years to reverse client withdrawals, starting from the first quarter of 2008.
The Swiss banking flagship posted a larger-than-expected third quarter net loss of 564 million francs, the seventh out of eight straight quarters the Swiss bank has been unprofitable.
"Although we are still not yet where we want to be, we believe we have embarked on the right path and are hopeful for a brighter future," Franco Morra, CEO of UBS Switzerland said in a year-end letter to clients seen by Reuters.
UBS was bailed out by the Swiss government and stood accused of helping rich Americans dodge taxes in the U.S. tax investigation. In 2008, it made a net loss of 20.9 billion francs, Switzerland's annual biggest corporate loss.
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